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3 Stocks That Blew the Market Away

Beat the market and the world will beat a path to your door.

Wall Street estimates are interesting. The pros are often pretty sharp in figuring out what a company is likely to earn, often down to the penny. But what about companies doing so well that even a sea of studious model-crunching MBAs can't figure them out?

That can often spell opportunity for you and me, as analysts scramble to assess the company's true earnings power. These are the type of stocks worth digging into, if only because they are often in a good position to repeat the feat the following quarter. Let's take a closer look at a few of the companies that humbled the prognosticators this past week.

We'll start with Warner Music Group(NYSE:WMG). The record label behind recording stars like Green Day and Madonna rocked the bean-counting house by earning $0.08 a share in its latest quarter before a series of charges. Wall Street figured the company would lose an adjusted $0.04 per share. Despite what many figured would be the death of mainstream music -- once peer-to-peer file-sharing networks made pirating tracks as easy as going online -- the industry has started to bounce back. More file-sharing hubs are going dark, and Apple(NASDAQ:AAPL) is continuing to educate the market on the merits of legal digital music downloads. That's high-margin gravy for record companies like Warner; Apple alone has sold more than 600 million songs online since launching its runaway smash iPod.

Movado(NYSE:MOV) was another topper. Time has been kind to the watchmaker; it earned $0.54 a share in the third quarter, six cents ahead of market projections. Sales at the retail level ticked 22% higher, thanks in part to a double-digit increase in comps at Movado's boutique watch stores. Timepieces aren't as fickle a fashion statement as designer duds -- though investors do have to make sure that the company's brands, such as ESQ, Concord, and Coach, remain viable wrist candy for buyers who can afford higher-end watches. So far, so good.

The Pantry(NASDAQ:PTRY) is the third company we'll be examining this week. Convenience store chains may not seem like an investing hotbed, but Pantry's done well, and Motley Fool Stock Advisor recommendation 7-Eleven soared 30% in just a few months before it was ultimately acquired by 7-Eleven Japan. The Pantry? Oh, it's simply been a 10-bagger since bottoming out in 2003. Not bad, huh? The 1,000-unit chain has been growing through acquisitions in a sector filled with mom-and-pop shops just dying to be consolidated. Pantry's been there for that. It's been able to cash in on unifying the fragmented convenience-store space, and the results have been impressive.

Last week, Pantry announced earnings of $1.12 a share in the company's final quarter of fiscal 2005. That was much better than the $0.96 mark upon which Wall Street was banking. Even more impressively, Pantry's results included $0.22 a share in charges tied to hurricane-related losses. The company is now looking to earn between $2.80 and $2.90 a share in its new fiscal year. A growth stock trading for a little more than 16 times its current fiscal year profit forecast? That's sweeter than honey-coated sugarcane jerky.

So keep watching the companies that lap expectations. Over time, they may prove to be a rewarding experience for investors. It's the kind of surprise that market watchers relish in the Rule Breakers newsletter service. The Rule Breakers strategy of pursuing ultimate growth stocks has paid off: The newsletter's average selection has trounced the S&P 500's market return. Want in? Check out a 30-day trial subscription.

Either way, come back next Monday to learn about more stocks that blew the market away.

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Longtime Fool contributor Rick Munarriz is a fan of toppers. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Author

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time with more than 20,000 bylines over those 22 years. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he splits his time living in Miami, Florida and Celebration, Florida.
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